Essar signs deal with Vale to get raw material supply for Saudi steel plant

Complete raw material supply of iron ore feed for project secured, says Indian firm

The Essar group has signed a partnership with Vale International for iron ore supply to the Indian firm’s proposed steel plant in Saudi Arabia. With this, 100 per cent iron ore supply for the plant is now secured.

The two sides signed a letter of intent (LoI) on September 1, said a statement on Thursday without giving financial details of the deal. The collaboration will supply iron ore agglomerates for the Green Steel Arabia (GSA) project.

Vale, a wholly owned subsidiary of global mining company Vale SA, will supply Essar with 4 million tonnes per annum (mtpa) of iron ore agglomerates (DR grade pellets and briquettes). Vale has facilities in Brazil and Oman and it is one of the leading providers of raw materials to integrated steel producers worldwide.

“Essar is looking at investing about $4.5 billion in setting up an integrated steel plant in Ras Al Khair, Saudi Arabia,” said Naushad Ansari, country head for Essar group in KSA (Kingdom of Saudi Arabia).

“Through this LoI with Vale, and the previous LoI with Bahrain Steel, we will have secured 100 per cent of the raw material supply of iron ore feed for the Saudi steel plant. Our plan is to start production in the year 2027, and [we] are confident of replacing the flat steel imports into Saudi Arabia and the GCC region with our bouquet of products,” he said.

 “Vale International's LoI with Essar for the annual supply of 4 million tonnes of high-grade iron ore agglomerated products signifies our long term commitment to meet the growing demand for raw material by the steel industry, especially in the Middle East,” said Andre Figueiredo, Vale’s regional director.

“Vale’s portfolio of high grade iron ore agglomerates will have a direct positive impact in terms of added value, price competitively and potential lower carbon footprint, thus fostering the expansion of the low CO2 emission steel industry,” he said.

The Essar group, in August, signed an agreement with Foulath's subsidiary, Bahrain Steel, to source 4 million tonne of DR-grade pellets per annum. The deal was aimed at securing 50 per cent raw material supply of iron ore pellets for the Saudi steel plant.

The Essar project aims to be the first green steel initiative in the region. It will consist of a direct reduced iron (DRI) capacity of 5 mtpa, comprising two modules of 2.5 mtpa each. The project will include a hot strip capacity of 4 mtpa, along with 1 mtpa of cold rolling capacity, as well as galvanizing and tin plate lines.